The co-founder of iamsold says that the firm’s ambition is to make the modern method of auction mainstream – with agents routinely offering it to vendors as a way of selling.
Jamie Cooke said that 2,500 estate agency branches already work with the Newcastle-headquartered business, using it as a white-labelled product.
He said there is plenty of growth still to come, with research showing that three in ten sellers would consider using the modern method of auction – “a huge target in terms of transactions”.
The modern method of auction is sometimes called a conditional auction, giving bidders time to assemble their finances before going ahead with their purchase.
It has also proved controversial, with the HomeOwners Alliance criticising it for alleged lack of transparency – something that iamsold categorically denies.
As a method of sale, its appeal to vendors is that they don’t generally pay commission – the buyer does – and there is increased certainty that the transaction will go through. However, they might not achieve the full value that a private treaty sale could.
For buyers, there is also the increased chance of certainty, with the property taken off the market while they put arrangements in place, but the drawback comes in the form of fees which they wouldn’t normally have to pay an agent in a private treaty sale.
The fees, split between the agent and iamsold, range between 2.5% and 4.2% including VAT, says Cooke.
The minimum fee, regardless of the price of the property, is however £5,000 – which works out to £6,000 including VAT. Could that come as a shock to a buyer, perhaps?
Iamsold says not – and has just released a new, voluntary code of practice which it hopes will become industry-wide, and which stresses transparency.
There is, potentially, an anomaly in that agents do not have to declare the cut that they get from iamsold in the way that they should declare referral fees (the Government has made it clear that unless agents declare referral fees – both what they are and how much – it will outlaw them altogether).
However, Cooke says that what agents earn from iamsold is not a referral fee, but a share of the commission earned by the two instructed companies.
Technically, agents do not have to declare earnings which aren’t referral fees. But could this be something of a wavy line?
Iamsold says not: it has consulted with regulator NTSEAT and both are agreed that as long as the arrangements are set out at the start, there is compliance.
Iamsold’s new code does say it should be made clear to vendors that buyers are likely to factor the fees they will be charged into their bids.
However, Cooke told EYE that there is “no specific evidence” that buyers actually do this – it is, he says, more about agents explaining the advantages and disadvantages of the method.
A clear advantage is that fall-throughs are minimal after the fall of the electronic gavel, at under 5%. Another advantage is speed – deals typically take under 50 days to complete although the system allows 56.
As the partner that is jointly instructed in each sale, iamsold undertakes considerable compliance, including anti-money laundering checks.
Cooke says that the old perception that sellers resort to auction on a cyclical basis – auctions are popular when markets are down, less so when they are up – is out of date.
He says there are two reasons to use the method: “One is when people need to get on and sell, and the other is where the agent has a property for which they believe there will be significant demand.
“Auction is a bit of a dirty word, and it won’t suit every property or vendor, but actually it’s an intensely compelling proposition for some.”
Auctions, says Cooke, are no longer about property investors looking for bargains, with just over half of all iamsold buyers purchasing for their own occupation.
And while the modern method can be offered both virtually and in bricks-and-mortar reality, some 70% of such sales are online.
Comments (9)
£100K property sells with Auction House – fee, say, 1% + VAT
£100K property sells by MMA – fee 5% + VAT
Why?
Having just watched BBC1 Homes under the hammer, where the tiniest one bed flat in Bayswater in a derelict condition (every thing needing doing) went for an eye watering £450,000 on a guide price of £400,000 is just ridiculous of how people are manipulated in Auctions and London prices. You couldn’t open the bathroom door it was that small the toilet was half across it!
This is the lesson for buyers at Auctions. You are in the main not buying a valuable antique, there is a very good reason why it has gone to auction and is more often than not ‘its condition’ and a quick sale otherwise it would be on the open market.
I have only ever recommended auction once, a property that was impossible to secure a mortgage and the fees are excessive. There is a place for Auctions but should become ‘mainstream’ … you must be kidding.
What a load of cobblers! This will never fly. Yes, the current system of buying and selling residential property is archaic and extremely frustrating but this is nonsense. In my humble opinion, a vendor should not be able to market their property until their solicitor is in a position to provide everything, and I mean everything, that the other side will need to exchange. If documents expire whilst marketing, eg the local search, tough, the vendor will have to renew/update or whatever. This way, all delays with gathering the information necessary to answer all enquires and iron out issues with leases, right of ways, planning consents, building control etc ect ect are at the front end. Furthermore, lenders should be forced to administer a mortgage application subject to valuation/survey only.
Then, the vendor cannot accept a bid without exchanging contracts, subject to survey only. In the event of a failed price renegotiation due to an adverse survey and or valuation, both parties can walk away.
A change in legislation to accommodate this new system will very quickly prompt new inovative buisnesses to assist those dependent on funds from a related sale. Alternatively, sell and rent. Chains will be history.
Am I missing anything?
This will never fly? It is flying and has been for a number of years – very successfully. It’s not for everyone but it can work very well in some cases.
Modern method of auction ‘should become mainstream’ offering by agents
Time will tell.
Have used this method of sale for nearly 8 years and always found it good for sellers and buyer but it has to the right circumstances I.e. seller wants to seller quickly and securely and the property is either cheap or rare. If it’s cheap buyers are happy to pay under market value and absorb the cost of purchase. If it’s rare buyers are happy to pay to secure the property against rival buyers. Just sold a detached 4 bed thatched cottage in 1.5 acre plot in need of refurb. Due to its rarity it sold £70k over surveyors valuation of 300k. Both seller and buyer very happy. However transparency is key to making it work.
The fees that IamSold charges to buyers is on average 4% this is not sustainable.
This model will only go mainstream if the fees buyers and sellers pay are similar.
Correct. This is a joke, surely. I’ve just checked and the biggest surprise this morning is that we are not waking up to the first day of April!
There do appear to be just too many inconsistencies and uncertainties with this Michael Mouse idea.
Not if they are buying the property under market value which is certainly the old norm at auctions. It would be interesting to see if any agents out there know of properties that have been sold this way and how the sale price stacks up against local values. If a buyer gets a property £10k or more under value then they will happily pay half that to do it.